Description

SEBI final order addressing unregistered investment advisory activities by Mr. Madhav Tiwari (Divinecommodity.co), following SAT challenge regarding computation of illegal gains and refund amounts.

Summary

SEBI has issued a final order under sections 11(1), 11(4), 11(4A), 11B(1) and 11B(2) of the SEBI Act, 1992 in the matter of unregistered investment advisory activities by Mr. Madhav Tiwari, Proprietor of Divinecommodity.co (PAN: AGZPT6444J). This follows a previous SEBI order dated September 20, 2024, which was challenged before the Securities Appellate Tribunal (SAT). The matter involves determination of illegal gains from unregistered investment advisory services, analysis of evidence including digitally generated invoices and bank statements, and directions for refund to investors.

Key Points

  • Mr. Madhav Tiwari admitted to acting as an investment advisor without SEBI registration
  • Noticee knowingly misrepresented himself as a SEBI registered entity and fraudulently assured guaranteed returns
  • Original SEBI order dated September 20, 2024 directed refund of INR 1,70,12,615 to investors
  • Noticee challenged the order before SAT claiming actual advisory income was only INR 9,66,207
  • Noticee claimed other amounts were from SEO (Search Engine Optimization) and other businesses
  • Violations established: Section 12(1) of SEBI Act read with Regulation 3(1) of IA Regulations, 2013
  • Fraudulent practices violations: Section 12A(a), (b), (c) of SEBI Act and Regulations 3(a), (b), (c), (d), 4(2)(k), and (s) of PFUTP Regulations, 2003
  • Original order imposed 2-year market ban and penalties of INR 5,00,000 under section 15HA and INR 1,00,000 under section 15EB
  • Final order involves consideration of burden of proof, computation of illegal gains, and analysis of digitally generated invoices and ledgers provided by the Noticee

Regulatory Changes

No new regulatory changes introduced. This order enforces existing provisions under:

  • SEBI (Investment Advisers) Regulations, 2013
  • SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003
  • SEBI Act, 1992

Compliance Requirements

  • Any person providing investment advisory services must obtain SEBI registration under IA Regulations, 2013
  • Investment advisors must not misrepresent their registration status
  • Entities must not fraudulently assure guaranteed returns to investors
  • Proper documentation and evidence of legitimate business activities must be maintained
  • Refund directions must be complied with as per SEBI orders
  • Market access restrictions must be adhered to during debarment periods

Important Dates

  • September 20, 2024: Original SEBI order issued
  • 2026-02-06: Final order circular date
  • Debarment period: 2 years from original order date or until filing of repayment report, whichever is later

Impact Assessment

Investor Protection: The order reinforces SEBI’s commitment to protecting investors from unregistered and fraudulent investment advisory services. The refund direction aims to recover investor funds.

Market Participants: Serves as a strong deterrent for entities operating without proper SEBI registration. Investment advisors and related service providers must ensure full compliance with registration requirements.

Enforcement Precedent: The final order demonstrates SEBI’s approach to analyzing evidence in disputed cases, including scrutiny of digitally generated invoices, ledgers, and bank statements to determine actual illegal gains.

Regulatory Focus: Highlights SEBI’s continued focus on curbing unregistered investment advisory activities and fraudulent practices in the securities market.

Burden of Proof: The order addresses the burden of proof in cases where noticees claim mixed sources of income, requiring proper substantiation of legitimate business activities separate from illegal advisory services.

Impact Justification

Enforcement action against unregistered investment advisor with refund directions and penalties. Relevant for regulatory compliance awareness but limited direct market impact.